Tuesday, July 1, 2008

HURRICANE WATCH: Insurers Criticized For New Rate Models

We have links to some of our global warming/insurance posts below. Also, a 'search blog' for Warren Buffett will pull up some posts on the topic.From the Wall Street Journal:

Scientists say the jury is still out on whether rising sea temperatures will cause more hurricanes to hit U.S. coastlines. Yet some insurance companies are boosting premiums based on assumptions that they will. Others are withdrawing from coastal communities altogether.

Last year, Leanne Lord of Marion, Mass., decided to put her house up for sale after her insurance premiums more than doubled to about $2,892 a year since 2005. Many of her Cape Cod neighbors, who hadn't seen a hurricane in the area since 1991, followed suit. Today, there's a glut of houses on the local market....

...Helping to drive these developments is a little-known tool of the insurance world: Computerized catastrophe modeling. Crafted by several independent firms and used by most insurers, so-called cat models rely on complex data to estimate probable losses from hurricanes.

But regulators and other critics contend that the latest cat models -- which include assumptions about various climate changes -- are triggering higher insurance rates....MORE